After comparing spending at rival Rogers Communications Inc. (RCI), UBS Securities analyst Jeffrey Fan found that Rogers has invested more on gaining and retaining customers in the past three and a half years. He also notes the technological advances that come with such spending.
As a result, Mr. Fan thinks Telus may need to continue to invest here in order to make further strides against Rogers.
Meanwhile, now that Telus has calmed any investor worries regarding a possible run at Bell Canada Inc. (BCE), no near term changes to its capital structure are expected. However, Mr. Fan still thinks Telus could make a significant share buyback.
He also noted that the current state of credit markets makes Telus a less likely leveraged buyout candidate.
Mr. Fan rates Telus at “neutral,” with a C$70 price target. In a note to clients he said,
Although there is approximately 25% upside from the current share price, we believe the lack of near-term catalysts will impact the share price performance, with share repurchases providing support. To become more positive, we would like to have better visibility on wireless performance in the 2H.